SpaceX entered the Nasdaq-100 index on Tuesday with Wall Street largely backing its $2 trillion valuation, but a prominent value investor is raising red flags about the company's ability to compete in AI. The debate centers on Grok, SpaceX's AI model, which legendary investor Jeremy Grantham dismissed as "third-rate" and said is being "kicked around the block" by rivals Anthropic and Claude. This criticism highlights a critical tension in SpaceX's growth story: the company's lofty projections depend heavily on AI success, yet its Grok model faces entrenched competition from better-funded competitors.

Why Does SpaceX's AI Strategy Matter So Much?

SpaceX is no longer just a rocket company. After acquiring xAI in February 2026 and folding in the X platform, the company now operates three distinct business segments: space (launch and reusable rockets), connectivity (Starlink broadband and mobile), and AI (compute, Grok, and advertising). Goldman Sachs analysts praised the company as "a unique company with a diversified opportunity set" across all three businesses, with each market potentially growing into the trillions. However, the AI segment is where the most aggressive growth assumptions live. Goldman forecasts AI revenue scaling from about $15.6 billion in 2025 to $589 billion by 2031, a staggering expansion that depends on Grok gaining market share against entrenched players.

The company recently bolstered its AI capabilities by acquiring Cursor's parent company, Anysphere, in a $60 billion all-stock deal in June 2026. This acquisition is expected to combine Cursor's coding intelligence and developer data with xAI's Colossus supercluster to strengthen Grok's capabilities. Yet even with these moves, Grantham's critique reflects a broader skepticism about whether Grok can close the gap with OpenAI and Anthropic, which are preparing for mega public listings with private valuations of about $965 billion and $852 billion, respectively.

What Are Wall Street Analysts Saying About SpaceX's Valuation?

Despite Grantham's warnings, most major brokerages initiated coverage of SpaceX with bullish ratings. Goldman Sachs set a 12-month price target of $205, implying roughly 28 percent upside from the July 6 close of $160.42. The bank's thesis rests on scale, forecasting total revenue climbing from $18.7 billion in 2025 to $474.3 billion by 2030, a 91 percent compound annual growth rate. Morgan Stanley was even more aggressive, setting a $300 price target with a bull case that would push SpaceX's revenue to over $3 trillion by 2040. Raymond James initiated at Strong Buy with a Wall Street-high price target of $800, arguing SpaceX could become one of the century's defining infrastructure platforms.

However, skeptics exist. MoffettNathanson initiated at Neutral with a $131 price target, and CFRA is the only major brokerage with a "sell" rating and a Street-low price target of $115. The consensus average price target across all analysts is $237.74, well above Goldman's $205.

How to Evaluate SpaceX's AI Competitive Position?

• Model Performance vs. Rivals: Grantham explicitly stated that 90 percent of SpaceX's long-term projections depend on Grok's "currently third-rate AI offering," which he said is being "kicked around the block" by Anthropic and OpenAI, suggesting Grok lags behind Claude and GPT models in capability.
• Compute Infrastructure Advantage: SpaceX has struck compute hosting deals with Anthropic, Alphabet, and Reflection AI at rates Goldman estimates run well above typical cloud pricing, giving the company a potential edge in deploying AI infrastructure at scale.
• Orbital AI Data Centers: Goldman models about 2 gigawatts of compute online by year-end, scaling to 36 gigawatts by 2030, with the company eventually planning to deploy AI data centers in orbit, a capability rivals cannot match.
• Developer Ecosystem: The Anysphere acquisition brings Cursor's coding intelligence and developer data into Grok's ecosystem, potentially strengthening its appeal to software engineers and developers who rely on AI coding tools.

Grantham acknowledged that index inclusion could lift the stock in the short run as forced buying from passive funds may outstrip available supply, but he warned that the longer-term risk remains severe, saying he would "bet at least 90 percent" on a crash rather than SpaceX ultimately justifying its current valuation.

Grantham

"SpaceX presents a track record of building toward solutions which many industry experts had previously viewed to be implausible," said Eric Sheridan, Goldman Sachs analyst.

Eric Sheridan, Analyst at Goldman Sachs

What Risks Could Derail SpaceX's Growth Story?

Goldman estimates SpaceX needs about $270 billion of debt between 2026 and 2030 and does not expect positive free cash flow until the fourth quarter of 2030. Morgan Stanley's Adam Jonas is even more cautious, modeling roughly $300 billion in annual capital spending by 2031 and no positive free cash flow before 2035. This means the company will be burning billions of dollars for years while trying to prove its AI and space ambitions can deliver the promised returns.

Another risk looms from insider lockups. Some insider lockups are expected to expire in tranches between 70 and 135 days after SpaceX's June 12 IPO, while CEO Elon Musk's shares and certain large-holder restrictions are expected to remain locked for about a year. When these restrictions expire, a wave of insider selling could pressure the stock, especially if the company has not yet demonstrated profitability or achieved key milestones.

SpaceX's initial index weight in the Nasdaq-100 is expected to be limited to about 1 percent to 1.3 percent because less than 5 percent of shares were sold publicly. This small public float means the company has limited liquidity relative to its $2 trillion market value, which could amplify price swings as demand from index funds fluctuates.

Grantham also questioned SpaceX's broader AI and space assumptions, saying some productivity claims show "no idea what they're talking about" and that much of the space-travel ambition in the prospectus would be viewed by serious physicists as "utterly inconceivable". His skepticism reflects a deeper concern: that much of SpaceX's valuation rests on aggressive assumptions about technologies that have not yet been proven at scale.

On retail trading platforms, sentiment has shifted dramatically. On Stocktwits, retail sentiment for SPCX flipped to "bearish" levels over the past week from "extremely bullish" levels at the time of listing, amid a massive 26,150 percent surge in message volumes over the past month. This suggests that early enthusiasm among retail investors may be cooling as the stock faces headwinds from broader tech sector concerns about the longevity of the AI boom.

The core question facing investors is whether SpaceX can execute on its AI ambitions fast enough to justify its valuation before cash burn and insider lockup expirations create downward pressure. Wall Street's bullish consensus suggests most analysts believe it can, but Grantham's warnings remind investors that even legendary companies can overshoot their fundamentals when valuations reach extreme levels.